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No deal at Capitol

With Monday's deadline for adjournment drawing closer, lawmakers are under growing pressure to negotiate a two-year budget deal that would avoid the need for a special session. They'd be bucking a trend, since the past three budget sessions went into overtime.

"I would not characterize anything as an agreement at this point," DFL House Speaker Margaret Anderson Kelliher of Minneapolis said when she emerged from the governor's office early in the morning and insisted a deal is still close.

Rep. Marty SeifertMPR Photo/Tim Pugmire

Without that illusive agreement in hand, Kelliher said the House and Senate would move ahead later in the day with public meetings on six budget bills. Kelliher says those meetings would help people understand the direction negotiations have been moving.

"There's obviously going to be a decision here at some point," she said. "And it's important as we have been through the last few days to have both our membership and the general public understand what the numbers look like and the result of where the numbers are going, the effect on people."

The nearly $35 billion budget will finance every aspect of state government, with the biggest shares going to public schools, health care and social service programs. But there are still big differences over spending priorities.

Another sticking point is the DFL push for tighter taxation of companies that shelter income through foreign subsidiaries. DFL Senate Taxes Committee Chairman Tom Bakk of Cook said Gov. Pawlenty wouldn't agree to close that $244 million loophole.

"I just think providing an opportunity for people to deliberately set up foreign shell corporations and hide revenue from Minnesota taxation is wrong. And the Senate bill proposes to change that," Bakk said.

Gov. Pawlenty's spokesman, Brian McClung, says the governor is willing to explore a "definitional change" related to foreign operating corporations, if it's linked to other business tax relief. McClung say the negotiations will continue.

A giving spiritMPR Photo/Tom Scheck

"We would like to see an overall agreement reached. We think that needs to happen for this session to wrap up productively," McClung said. "But at this point, the DFL has decided to move forward with out that."

Negotiations with the governor began in earnest Wednesday. By Friday afternoon, Democrats and Republicans were sounding upbeat and optimistic about reaching an agreement. But for House Republican Minority Leader Marty Seifert of Marshall, optimism turned to disappointment. Seifert was particularly concerned about the DFL plan to move ahead with budget bills.

"If you want sit down and start hammering policy out with governor's staff at the table, with our ranking members at the table, I wouldn't say that's outrageous. But if you start assembling budgets with non-agreed-upon numbers and non-agreed-upon policy, that would be a mistake," Seifert said.

House and Senate leaders were expected to return to the governor's office to resume budget negotiations by early afternoon. Their deadline for passing bills is midnight Monday.